The U.S. commercial real estate sector is showing signs of improving stability as of July 2025, with particular resilience in industrial, multifamily and data center assets. Despite uncertainty stemming from trade policy and economic headwinds, leasing activity and investment interest are holding firm within select asset classes. Industrial real estate remains the strongest corner of the market, though signs of normalization have emerged. Q2 2025 industrial deal volume held steady at approximately $22.9 billion, flat compared to Q2 2024, after two quarters of intense growth. Vacancy rates in warehouses have climbed to around 7.1%, the highest reading since 2014. Oversupply from the pandemic era paired with cautious tenant behavior due to tariff-driven trade uncertainty has muted leasing activity. Speculative warehouse development has slowed, with just 60 million square feet completed in Q2, the lowest since early 2019. Yet demand for build-to-suit industrial facilities is resurging. Prologis launched over $900 million in new industrial projects in Q2, nearly triple last year’s pace, with 65% of those spaces pre-leased and full-year commitments raised to between $2.25 and $2.75 billion. Similarly, Brookfield closed a $428 million deal involving 53 older, high-occupancy warehouses between Houston, Dallas, Nashville and Atlanta, aiming to raise rents selectively as leases expire. Multifamily investments remain strong heading into mid 2025. With household formation increasing and homeownership costs rising, renters continue to fuel demand. Rents are stabilizing and occupancy rates are improving despite elevated interest rates and robust new supply. Analysts describe this sector as the most preferred among CRE investors this year. Read Also: https://rentmagazine.com/ai-and-robotics-reshape-commercial-real-estate-operations/ The office sector remains bifurcated. Lower-tier assets continue struggling while Class A office buildings in major urban cores such as Manhattan, Washington D.C. and Miami are enjoying steady leasing demand. Leasing tours and deal inquiries remain elevated for high-end office space despite broader economic uncertainty. CBRE anticipates vacancy stabilization and modest upticks in occupancy and rents in the most attractive office segments. Data center properties continue to benefit from surging demand tied to cloud services, AI infrastructure and enterprise IT growth. Supply remains insufficient to match demand, making these assets a standout within CRE portfolios. AI expansion is fueling consumption of high-density computing, triggering new data center construction, though developers are grappling with energy, connectivity and land constraints. AI and proptech tools are now widely recognized as core to CRE decision-making. From underwriting and predictive analytics to tenant management and energy optimization, AI is reshaping workflow across asset classes. A recent Morgan Stanley survey finds 32% of REITs increasing AI exposure, with nearly 37% of CRE tasks estimated to be automated, boosting efficiency and risk mitigation. AI-driven site selection tools are enabling developers to pinpoint locations for data centers and industrial assets more accurately by layering logistics, economics, labor and infrastructure data. Leading firms now view AI not just as a novelty but as a core competency shaping real estate strategy. The outlook for major asset classes continues to diverge. Industrial real estate is stabilizing from pandemic-era overbuilding but remains healthy for build-to-suit developments. Multifamily remains in high demand with strong rental fundamentals. Class A office assets in top-tier urban markets show resilience. Data centers continue to outperform due to persistent undersupply and rising digital infrastructure needs. Overall, commercial real estate is transitioning into a more balanced era. Experts foresee modest growth in investment volume and general stabilization across sectors in the second half of 2025, even if interest rates remain elevated. Challenges remain—from global trade uncertainty and tariff risks to inflation and supply imbalances—but greater predictability in underwriting and expanded use of technology are helping investors navigate an evolving landscape. July 2025 finds U.S. commercial real estate on firmer footing. Industrial assets are adjusting to oversupply through build-to-suit demand. Multifamily continues to attract investor interest. Class A offices in key cities retain appeal, and data centers are thriving under infrastructure constraints and digital growth. Across the board, AI and automation are helping firms manage risk, optimize returns and respond to changing market dynamics.

Late last year, many were predicting a new growth cycle for the U.S. Industrial Commercial Real Estate (CRE) market. For example, in December when CBRE published its 2025 U.S. Real Estate Market Outlook, they predicted that the U.S. industrial market would enter a new cycle in 2025 with a return to pre-pandemic demand drivers. They said industrial occupiers would start focusing on longer-term strategies to improve warehouse efficiency and ensure supply chain resiliency. And that demand for newly constructed space would drive up the vacancy rate of older buildings. At that time, few anticipated the level of uncertainty that would ensue in the wake of changing U.S. economic and trade policies. As of May 2025, the U.S. and China had paused their retaliatory tariffs for 90-days, leaving a 30% levy that the U.S. is now imposing on Chinese goods. However, businesses and investors must contend with uncertainty about whether the truce will last. But this situation is only part of a broader scenario in which dozens of other countries await news from the White House regarding revised tariff rates that will follow the current 90-day pause. The result is already reshaping the global supply chain and logistic networks, starting with the slowing flow of goods into the U.S. The Port of Los Angeles, for instance, has seen a 35% drop in arriving cargo vessels as of the 2nd week in May 2025 vs. the same week a year earlier. The disruption goes beyond the here and now; the inability to plan into the months ahead makes the situation at the ports a guessing game for labor and planning, including the scheduling of dockworkers, heavy equipment operators, and trucking services. According to Gene Seroka, executive director of the Port of Los Angeles, “As far as forecasting, with the whipsaw effect of information that’s been coming out of Washington — the reprieve of 90 days, the changes with electronics and auto parts, and maybe some retail in the middle of that — it’s really hard to forecast.” As disruptions trigger a ripple effect across industries worldwide, the global supply chain is positioning itself for major transformation. With markets in flux, the National Association for Industrial and Office Parks (NAIOP) reports that many companies are pausing investment and deferring major decisions, including whether and where to lease industrial space. At this point, experienced CRE industry professionals must rely on their knowledge — guided by the cyclical history of CRE, day-by-day data analysis, the latest intelligence, and some instinct. Let’s take a look at just some of the ways this may all unfold — and what it could mean specifically for industrial CRE. Industrial Leasing and Tenant Demand The industrial leasing market has been steady but cautious as tenants digest the tariff news. Key leasing trends include: Lease renewal over expansion — Many companies have delayed new warehouse expansions or relocations, opting instead to renew existing space until tariff outcomes are clear. CBRE recently reported that industrial construction slowed while industrial leasing held steady at about 180M square feet in Q1 of 2025. Rise of third-party logistics (3PL) demand — Amid trade policy uncertainty, CBRE sees some industrial occupiers outsourcing to 3PL providers. As more businesses rely on them, these providers will, in turn, take on a larger share of leasing activity. Vacancy tick-up — Even with solid leasing deals, overall vacancy has crept upward — due in part to new supply hitting the market. CBRE reported a 20 basis-point rise in national vacancy to about 6.3% in Q1 2025 — the highest level since 2014. Potentially slower economic growth would also weaken fundamentals across property types, leading to higher vacancy rates, and be a headwind for investment activity. However, this may be partially offset by lower long-term interest rates and cheaper debt costs. Modest net absorption — With some tenants on hold, net absorption is subdued. For example, CBRE cites just 23.3 million square foot of positive net absorption in Q1 2025, which is modest compared to earlier peaks. In summary, leasing activity so far in 2025 is underpinned by tentative demand: occupiers are holding off on major expansions, while 3PLs and domestic distributors lead tenant activity in the interim. Construction Activity and Costs Tariffs are also crimping the development pipeline and construction budgets for Industrial, with the result being a rise in material prices and project delays: Higher material costs — New levies on steel, lumber, equipment and other inputs will increase construction expenses. CBRE estimates that the tariffs announced in April 2025 could inflate overall commercial construction costs by roughly 5%. Projects on hold and a shrinking pipeline — Faced with cost uncertainty, many developers are pausing or scaling back new projects. Groundbreaking of some developments may be put off as builders re-evaluate feasibility under higher-cost scenarios. JLL notes that U.S. industrial projects under construction totaled about 253 million square foot by Q1 — roughly 30% less than a year earlier and the lowest pipeline level since 2015. According to CBRE, in Q1 alone just 64.6M square foot of new industrial space was completed, the weakest quarterly delivery tally since 2018. In many markets, construction starts are near decade-lows as speculative projects are deferred. Supply chain delays — Tariffs and trade disruptions are also affecting the supply chain for construction itself. The NAIOP Research Foundation notes that companies are carrying higher inventories of building materials to buffer tariffs, but near-term shortages or shipping delays appear possible. For example, surcharges on Chinese-built ships and other fees have effectively reduced freight capacity to U.S. ports, which could slow shipments of steel and equipment and delay project timelines. Overall, industrial remains the strongest corner of the market. The consensus is that industrial and multifamily will lead any recovery in investment activity. However, many are factoring in a premium for uncertainty; one recent summary noted that tariffs were already “reducing the strength” of CBRE’s incoming business pipeline. In practice, transaction volumes have slowed slightly in Q1-Q2 as buyers and sellers price in trade risk. Still, global allocators with limited U.S. exposure are actively looking to enter the industrial sector. Outlook: Reshoring and Opportunities Ecommerce and manufacturing reshoring continues to underpin demand for warehouses and factories. Key drivers for this rebound include: Reshoring of manufacturing — A number of companies are moving production back to North America to avoid high tariffs and improve supply resilience. New factory and processing facility needs (like semiconductors, electric vehicles [EVs]), pharma and food processing) will drive fresh demand for industrial land and buildings. Nearshoring and trade deals — Even before the 2025 tariffs, firms were planning to source more regionally. A 2023 Accenture study found that by 2026 about 65% of companies intend to buy key inputs from regional suppliers, a significant increase from the current 38%. This shift reflects a broader trend of companies seeking to become more resilient to supply chain disruptions by diversifying their sourcing and production. Technological and Green transformations — With competition growing in industrial CRE, some landlords are repositioning assets with sustainability upgrades or flexible layouts. Energy-efficient space that provides automation, robotics, etc., remains attractive to cautious tenants during economic uncertainty. Conclusion The current uncertainty around tariffs has produced some challenges for industrial CRE — the possibilities of slow leasing growth, combined with rising construction costs, is adding risk to underwriting. However, there may still be reason for optimism. When the tariff situation is resolved, the underlying fundamentals — low vacancy in core regions, rising regional manufacturing, and e-commerce growth — are likely to lead to growth in the industrial market.